Global Benefits Assessment Sample
Global Benefits Assessment ABC Company
GLOBAL BENEFITS ASSESSMENT Table of Contents TABLE OF CONTENTS EXECUTIVE SUMMARY Section A Summary of Benefits Assessment Process.....................................1 Global Scorecard.............................................................................4 Recommendations...........................................................................5 COMPANY PROFILES Japan Section B Company Profile..............................................................................1 Summary of Existing Benefits..........................................................2 Benchmark Analysis........................................................................9 Recommendations ........................................................................13 United Kingdom Section C Company Profile..............................................................................1 Summary of Existing Benefits..........................................................2 Benchmark Analysis........................................................................5 Recommendations.........................................................................12 APPENDICES: SOCIAL SECURITY DISCLAIMER: The information and data in this report are for informational purposes only, and are based solely upon information and data provided to representatives of XYZ / Globex during interviews with representatives of ABC. We do not independently verify the accuracy of the information and data provided, and nothing contained herein shall be considered an accurate, complete or binding representation of actual exposures or values at risk. We assume no liability or responsibility for any errors, omissions or inadequacies contained in this Assessment. ABC – Global Benefits Assessment i
EXECUTIVE SUMMARY Benefits Assessment Process We are pleased to present this Global Benefits Assessment. This report provides a detailed review of ABC’s Employee Benefits programs (in particular, its Pension, Life/Accident, Disability and Medical benefits) provided in Japan and the United Kingdom. This is the first step in a planned review of ABC’s benefits worldwide, culminating in a review of potential global strategies to educate and empower your Home Office and Regional employee benefits management to understand and control your global employee benefits moving forward. SUMMARY OF THE BENEFITS ASSESSMENT PROCESS As outlined in our project proposal, the primary objective of this Benefits Assessment was to evaluate whether the corporate sponsored employee benefits offered by ABC in each country were: 1. Effective in terms of plan design, costs, and service provider utilization on a local and global scale 2. Cost efficient and designed to take advantage of global strategies where appropriate 3. Compliant with local requirements for social security and other compulsory benefits programs. The Benefits Assessment process involved three major components: Information Gathering / Inventory Our appointed Project Consultants initiated the Local ABC Contacts project by contacting David Smith, VP of Global HR, in order to: ‰ Japan – Takashi Murakami ‰ United Kingdom – Gregory Mathers ‰ Establish the Benefits Assessment scope and procedures for each country, ‰ Modify the generic inventory questionnaire to local conditions in each country, and ‰ Determine whether, and with whom, direct contact with local ABC representatives was necessary and appropriate. In each case, the direct contact in each country proved very useful in gathering the necessary information and answering additional questions as they arose. The questionnaire results are provided in the “Summary of Existing Benefits” section of each Country Report to follow. Benchmark Analysis Based upon the information gathered during interviews with the ABC representatives, the local Project Consultants conducted a benchmark analysis of ABC’s programs that included: ‰ Comparison of the existing program with that offered by other companies of similar size, industry and location; and ‰ A review of the existing program with regard to local trends, customs and legislation. ABC – Global Benefits Assessment Page A - 1
EXECUTIVE SUMMARY Benefits Assessment Process In each country, priority was given to the list of “Reference Companies” provided by ABC. However, the sources of benchmarking data varied from country to country as described below: Japan Benchmark data was drawn from a combination of public information and our existing client database. For reasons of confidentiality we are unable to disclose the names of the clients utilized for this analysis, other than to confirm that the total sample size for this analysis included ten high technology companies, six of which were identified in ABC’s list of global competitors. United Kingdom The United Kingdom is relatively liberal and competitive. Our Project Consultants conducted a detailed analysis against their national database of Large and Small companies. In each major category of benefits, ABC’s current plan is compared against the reference companies and given one of five symbolic “grades” that corresponds to its competitive position. These grades are based on objective judgment, but because not all plans offer identical features, grading some programs also relies on the professional judgment of our Consultants based on their experience in the marketplace. Benchmark results are presented in the Benchmark Analysis section of each Country Report, and the overall results are summarized later in this report. Recommendations Based upon the Inventory and Benchmark Analysis results, we then compiled a set of country- specific recommendations to achieve ABC’s stated goal of providing “competitive” benefits in each location. A Global Analysis, exploring the feasibility of global strategies such as multinational pooling or global travel accident coverage, will comprise the final Phase of this project. ABC – Global Benefits Assessment Page A - 2
EXECUTIVE SUMMARY Global Scorecard GLOBAL SCORECARD This Global Scorecard represents a graphical summary of the Benefits Assessments performed in each country. This is intended to help understand the “big picture” of how your existing employee benefits programs compare with the reference companies for each country. In general, ABC’s local management has done a commendable job of developing, implementing and managing employee benefits programs that are locally competitive. More details on these findings can be found in the Country Profiles to follow. Benefits Offered (What commonly available benefits does ABC offer?) Japan United Kingdom Life/Accident Y X Y √ Disability N X Y √ Medical Y √ Y √ Pension Y √ Y √ LEGEND Y N √ X Commonly Available Not Commonly Offered by ABC Not Offered by ABC Locally Available Locally ABC vs. Benchmarks (How does ABC’s benefits compare with its peers?) Japan United Kingdom Life/Accident ▼ ▲ Disability ‘ ‘ Medical ‘ ▲ Pension ‘ ▼ OVERALL ‘ ▲ ▼▼ ▼ ‘ ▲ ▲▲ LEGEND Significantly Moderately Meets Moderately Significantly Below Below Benchmarks Above Above Benchmarks Benchmarks Benchmarks Benchmarks ABC – Global Benefits Assessment Page A - 3
EXECUTIVE SUMMARY Recommendations COUNTRY-SPECIFIC RECOMMENDATIONS Given your stated objective to provide “competitive” employee benefits in each country, our analysis suggests the following modifications may deserve consideration: Japan ‰ Retirement/Termination Benefits o Switch from current unfunded benefit arrangement to DC plan within next 1-2 years o Cost impact: typically none/ minimal ‰ Life/Accident o Implement Group Life/AD&D plan with death benefits 2x salary o Added cost: JPY 1.62 million/year ‰ Housing Plan o Increase maximum rent cap by approx. JPY 10,000 monthly o Added cost: Depends on number of employees effected United Kingdom ‰ Defined Contribution Pension (DC) o Consider increasing employer contributions ‰ Individual Pension (IP) o Carry out in depth market review ABC – Global Benefits Assessment Page A - 4
JAPAN Company Profile COMPANY PROFILE Local Name: ABC Japan Co. Ltd. Location: 2-15-1 Konan Minato-ku Shinagawa Intercity Tower A, 22F Tokyo, 108-6022 Headcount: 35 as of January 1st this calendar year Payroll: JPY 15,041,775 as of January 1, this calendar year Contact: Takashi Murikami, Senior Manager, Compensation and Benefits -- Japan Oroku Saki, Japan Currency: Japanese Yen - JPY 1 = approx. USD 0.01 ABC Japan Co. Ltd. Page B - 1
JAPAN Existing Benefits SUMMARY OF EXISTING BENEFITS Overview of Private Benefit Plans Provided Type of Plan Plan Exists? Plan participation is Yes No Voluntary Mandatory Defined Benefit Retirement X X Defined Contribution Retirement X Life Insurance X Short Term Disability X Long Term Disability X Medical Insurance X X Worker’s Compensation X X Child Care Allowance X X Gift Money X Company Housing Plan X Defined Benefit Retirement / Termination Benefits Plan Details Program Name ABC Pension Plan Program Type Unfunded, Book Reserve Final Salary Scheme Effective Date 2000 Recent Changes (past 2 years) None Participation Details Plan Participation All full time employees Eligibility Requirements 3 years of service Number of Employees 8 employees Accrued Benefits JPY 29,805,202 Book Reserve Allocation JPY 42,085,975 Benefit Details Payment Options Lump Sum only Final Salary Formula (Final base salary x 18) / 16.5 Benefit Formula - Retirement Final salary times multiplier based on years of service Benefit Formula - Termination Final salary times a reduced multiplier based on years of service Accrued Benefits JPY 29,805,202 Book Reserve Allocation JPY 42,085,975 Medical Insurance No medical benefits are provided other than those under the government scheme. However, the government scheme covers 70% of all medical costs including inpatient, outpatient, drug and dental (30% of co-pay). The co-pay of the 30% of cost is capped at JPY 40,000 per month. Spouse and dependants are also covered with no additional premium. ABC Japan Co. Ltd. Page B - 2
JAPAN Existing Benefits In Japan, there are many industry-based healthcare plans that are quasi-governmental and contract out of the government medical insurance. Those semi-private plans offer slightly better coverage, at lower premiums to their member companies, than the government plan. ABC Japan participates in the healthcare plan of Kanagawa prefecture’s Electric Machinery Association. The top-up benefits provided by the association are as listed in the table on the following pages. ABC Japan Co. Ltd. Page B - 3
JAPAN Existing Benefits Medical Insurance: Government Scheme vs. ABC Japan Health Insurance Coverage Government Employee’s Health Insurance Coverage ABC Japan Health Insurance Coverage (quasi- Governmental) Inpatient Provider Government Kanagawa-ken Denshi Denki Kiki Health insurance Association (contracted out of Government) Outpatient Government Kanagawa-ken Denshi Denki Kiki Health insurance Provider Association (contracted out of Government) Eligibility All full-time employees Same as Government Participation Employee Coverage – compulsory Same as Government Dependant Coverage – voluntary - Deductible/ Co- Employees and dependants pay 30% of cost of all care Same as Government insurance (incl. Dental) and prescribed drugs -Reimbursement When the medical costs per month at a single hospital or clinic exceed the following ceilings, the excess is reimbursed to the patient. (Maximum of co-payment) • 72,300 yen + (medical costs – 241,000 yen) x 1% The co-payment is capped at 40,000 yen per month • If the averaged income over 560K yen per month: 139,800 yen + (medical costs – 466,000 yen) x 1% Note: -The above max co-payment is calculated per institution, inpatient & outpatient separately, dental and other categories separately. -Private and semi-private hospital room should not be included in the medical costs -Claims for dependents can be included Coverage outside Any medical cost incurred outside Japan (no geographical Same as Government Japan limit) is subject to reimbursement up to 70% of the cost considered equivalent to the cost under the Japanese Medicare System. ABC Japan Co. Ltd. Page B - 4
JAPAN Existing Benefits Government Employee’s Health Insurance Coverage ABC Japan Health Insurance Coverage (quasi- Governmental) Other Benefits • Out of pocket maximum for chronic renal insufficiency, Same as Government haemophilia, and acquired immunodeficiency diseases (including HIV) is 10,000 yen per month per institution. • Out of pocket maximums for incurable or intractable diseases acknowledged by the government are 14,000 yen per month per institution for inpatients, 2,000 yen per month per institution for outpatients (up to 2 visits). • Meal support for inpatient: meal expenses exceeding 780 yen per day are paid directly by the insurance to the hospitals - Benefits • Birth grant: maternity is not covered except In addition to left; complication in delivery, but birth grant of 300K yen is • Health Exam: 700 yen to 45,000 yen subsidy provided per child depending on a type of exam • Maternity benefits: for the period 6wks before delivery • Dental Checkup: 3,000 yen subsidy (10 wks for multiple birth) & 8 wks after delivery, 60% • Childbirth Allowance: 300,000 yen per child of average daily basic wage is provided by the • Additional Funeral Grant: 50,000 yen if the insured is insurance diseased. 20,000 yen for dependent th • Sickness benefits: from the 4 day of absence from work, 60% of average daily basic wage is provided for up to 18 months of leave of absence due to injury or illness • Funeral grants: equivalent to 1 month of the insured person’s salary is provided upon his/her death ABC Japan Co. Ltd. Page B - 5
JAPAN Existing Benefits Government Employee’s Health Insurance Coverage ABC Japan Health Insurance Coverage (quasi-Governmental) Exclusions What is not covered: Same as Government, but health examination is provided • normal pregnancy and childbirth annually • abortion for economic reasons • health examination or checkups • vaccinations • cost of eye glasses, contact lenses, refractive eye surgery • cosmetic surgery, orthodontics (tooth straightening) • chiropractic • acupuncture, moxibustion, massage (these are only covered when a doctor has recommended them) • difference between insured hospital bed and (semi-) private hospital room • meal expenses (inpatients) up to 780 yen per day (excess of this amount will be covered) • transport cost for a person to accompany the insured Premium Rates 8.2% of gross salary (monthly salary capped at 980K yen, 7.6% of gross salary (monthly salary capped at 980K yen, bonus 2M yen) borne 50/50 between employer and bonus 2M yen) borne 50/50. 8.7% for the employees over employee age 40. (no premiums for dependents) ABC Japan Co. Ltd. Page B - 6
JAPAN Existing Benefits Comprehensive Worker’s Compensation Insurance Plan Details Plan Type Supplementary Eligibility Requirements All employees all employees who participate in the government WACI (worker’s compensation) Death Benefits Flat JPY 10,000,000 for work-related death admitted by the government worker’s accident comp scheme Disability Benefits Between JPY 500,000 to 10,000,000 in accordance with permanent physical disability schedule (below) * Annual Premium JPY 180,030 (for approximately 50 employees) Employee Contributions None Employer’s Liability Rider - Employer Liability JPY 100,000,000 - Annual Premium JPY 129,480 * Permanent Physical Handicap Classes: Degree of Benefit Degree of Benefit Permanent Physical Handicap (JPY 000) Permanent Physical Handicap (JPY 000) Loss of Life 10,000 Class 8 4,000 Class 1 10,000 Class 9 3,000 Class 2 10,000 Class 10 2,500 Class 3 9,000 Class 11 2,000 Class 4 8,000 Class 12 1,500 Class 5 7,000 Class 13 1,000 Class 6 6,000 Class 14 500 Class 7 5,000 Temporary Physical Handicaps 2,000 Child Care Allowance Plan Details Plan Type Statutory Eligibility Requirements Annual income must be below JPY 4.6 million to 6.5 million (depending on the number of dependents) to apply. Statutory Benefits JPY 5,000 per month per child (JPY 10,000 per month for the third child +) is provided until March 31 following the 9th birthday of the child. Additional Benefits None Premium 0.09% of total remuneration Employee Contributions None ABC Japan Co. Ltd. Page B - 7
JAPAN Existing Benefits Gift Money Plan Details Plan Type Non-Statutory Eligibility Requirements Employees experiencing specified event Gift Money Amounts Wedding - JPY 30,000 for the employees with over 3 years of service - JPY 20,000 for below 3 years of service Childbirth - JPY 5,000 for the first child - JPY 3,000 for the 2nd child onward Injury / Illness - JPY 20,000 for the injury / illness persisting for more than 2 weeks - JPY 30,000 for more than a month - JPY 50,000 for more than 2 months Disaster - JPY 50,000 or higher depending on the degree of calamity Employee Contributions None Company Housing Plan Plan Details Plan Type Non-Statutory Eligibility Requirements Employees who are transferred to a location outside of their main residence at the request of the company. Benefits Company provides 80% of the rent plus deposit / key money up to the maximum in below chart: Benefit Cap Tokyo / Osaka Other areas - Single Rent JPY 70,000 JPY 60,000 Deposit / Key Money 2 months rent JPY 700,000 - Married Rent JPY 90,000 JPY 80,000 Deposit / Key Money 2 months rent JPY 1,000,000 Period of Benefits 10 years Employee Contributions 20% of the rent plus any amount exceeding the above cap ABC Japan Co. Ltd. Page B - 8
JAPAN Benchmark Analysis BENCHMARK ANALYSIS Benefits Commonly Available Quick Scorecard As with other countries, the roots of social security in Japan can Benefits Offered be found in charity-oriented communal activities for the poor in a Pension: Y √ pre-modern era. In the modern era, while legislations such as Life: Y X Indigent Person's Relief Regulation (1874) and Poor Relief Law Disability: N X (1932) were enacted, the modern social security system based Medical: Y √ on the state's responsibility in sharing and mitigating social risk Worker Comp: Y √ of the population did not start until after the World War II and the Japanese Constitution. Y Typical Private Benefits N Not Typical Starting with the urgent need to relieve the war-stricken people, √ Currently Provided the system of social security has gradually extended its reach. In X Currently Not Provided Japan, the term "social security" means a range of social policies that are the task of a welfare state, from income security ABC vs. Benchmarks Pension: ‘ to the public health. The major schemes include Health Life: ▼ Insurance, Disease Prevention, Long-Term Care Insurance, Disability: ‘ Public Pension, Public Assistance, Employment Insurance, and Medical: ‘ Occupational Accident Insurance. Worker Comp: ‘ Overall: ‘ The year 1961 was memorable in the history of Japanese social security. Two laws for universal health insurance and pension ▲▲ Significantly Above were enacted in 1958 and 1959, respectively, and enforced in ▲ Moderately Above 1961. They have become the two main pillars of Japanese ‘ Meets Benchmarks social security system. Together with the Public Assistance Law ▼ Moderately Below (1946) and the Employment Insurance Law (1974), they are the ▼▼ Significantly Below main institutions of social policy to mitigate the risk of sickness, accidents, unemployment and old age. The primary Occupational Supplementary Plans applied to employees of private firms in Japan generally include Pension, Medical, Life and Worker’s Compensation. Typically only large or mid-sized employers provide disability insurance. As noted earlier, ABC Japan Co. Ltd. provides the following benefits to all employees: ‰ Defined Benefit retirement / termination benefits ‰ Medical Insurance ‰ Child Care Allowance ‰ Gift Money ‰ Company Housing Plan ABC Japan provides the statutory minimum vacation days for all employees. Overview of Benchmark Analysis Benchmark data was drawn from a combination of public information and our existing client database. For reasons of confidentiality we are unable to disclose the names of the clients utilized for this analysis, other than to confirm that the total sample size for this analysis ABC Japan Co. Ltd. Page B - 9
JAPAN Benchmark Analysis included ten high technology companies, six of which were identified in ABC’s list of global competitors. Pension Reference Companies ABC Japan’s retirement / termination benefits curve seems ‰ 10 High Technology to be in line with market norms and the companies reviewed Companies in this analysis. While many companies still have more seniority-based curves where the benefits are small at early years of service and increase drastically after 20 years, the ABC curve increases in a more linear fashion (similar to a Cash Balance curve) and therefore the exposure to unpredictable future liability increases is limited. However, in terms of a funding vehicle, it should be noted that many companies are moving away from unfunded book reserve to external funding such as Defined Contribution option. There will also be a major shift away from “termination lump sum plan” to an old age pension plan in the Japanese corporate pension environment, as the social welfare pension is going to be reduced for younger generations and it would be more and more important for companies to encourage the employees to plan ahead for their post-retirement life. Life Insurance ABC currently offers no Life or AD&D insurance. This represents a weakness compared with the other companies reviewed, and it is advisable to offer life insurance as well as AD&D rider to remain competitive. Overall, the market average for Life Insurance is 2 x annual base salary, capped at JPY 20 - 40 million, with an additional 1 or 2 x annual base capped at JPY 10 million for AD&D. Disability Insurance ABC currently offers no Long Term Disability or Short Term Disability coverage, and this is typical for employers of similar size. When an employee becomes disabled and cannot work, 60% of average daily wage is provided by the government health insurance for up to 18 months. Because of these statutory benefits provided in Japan, most employers in Japan do not provide STD and LTD benefits, with the possible exception of mid-size or large companies that allow employees to choose disability benefits from a list of possible choices in a cafeteria plan. Medical Insurance In Japan, there are many industry-based healthcare plans that are quasi-governmental and contract out of the government medical insurance. Those semi-private plans offer slightly better coverage at smaller premiums to their member companies than the government plan. ABC Japan participates in the healthcare plan of Kanagawa prefecture’s Electric Machinery Association. Overall, the ABC plan is fully consistent with market norms. ABC Japan Co. Ltd. Page B - 10
JAPAN Benchmark Analysis Reference: relationship between Social Security and LTD / Comprehensive WACI (1) Leave of absence due to work-related injury / illness LTD 180 days waiting period Comprehensive Workmen’s Accident Compensation Government WACI 60% of Average Wage 3 day Until being able to get back to work waiting period (2) Leave of absence due to injury / illness occurred off-site 180 days waiting period LTD LTD Until age 60 Government Health 60% of Average Wage National Pension Disability Insurance 3 day waiting 18 months period Worker’s Compensation The comprehensive workmen’s accident compensation is a popular scheme in Japan. The government WACI has 3 days of waiting period, which is however a responsibility of the employer to provide minimum 60% of daily wage. This policy provides benefits automatically when WACI claim is admitted. It also covers employer’s liability. Even with this comprehensive WACI in place, it is still recommended to include a AD&D rider with the Life insurance coverage (see the above Life section) because some claims may be rejected under WACI, even those that are work-related. Housing Plan The housing plan has historically been an important part of the employee benefits package in Japan. In many companies it is designed to support the relocation of existing or new employees who need to rent an apartment within commuting distance. There are two popular methods for providing this benefit: ABC Japan Co. Ltd. Page B - 11
JAPAN Benchmark Analysis 1. The most popular method is that the employer signs the lease and deducts certain percentage of the rent from the employee’s salary, which is income tax deductible for the employees. 2. Another popular method is to provide a fixed amount depending on the number of dependent family members living together, which is considered the employee salary and is taxable. ABC Japan currently provides the first type of housing plan to the relocated employees. In light of the current market, ABC’s maximum rent seems a little low, which may indicate it has not been adjusted in keeping with the real estate market price for a while. Raising the cap by JPY 10,000 would bring this benefit back in line with the market. The second type of housing allowance, (i.e. providing a fixed benefit amount), is more commonly used by large size companies in addition to the first housing plan for the relocated employees. Since in many cases these benefits are paid not only to relocated employees, but to all employees, the amount is not large and is around JPY 15,000 to JPY 30,000 per month depending on the number of dependants. Gift Money Most of ABC’s benefits in this category seem to be in line with the market practice. These are very traditional types of benefits that have been provided to enhance the sense of loyalty and belonging among employees. Although they have lost much of this function today, these benefits remain unchanged in most companies. ABC Japan Co. Ltd. Page B - 12
JAPAN Recommendations RECOMMENDATIONS Employee benefit policies can vary significantly Recommendations at a Glance from company to company based on corporate philosophy, competitive situation and sensitivity ‰ Retirement / Termination Benefit: to cost, among other factors. While the o Switch from current unfunded recommendations presented in this section will benefit arrangement to DC plan discuss plan design changes needed to bring within next 1-2 years ABC Japan’s employee benefits plan in line o Cost impact: typically none/ with local trends and customs, ultimately the minimal decision to implement these changes will require internal review and discussion. ‰ Life Insurance: o Implement Group Life/AD&D plan Retirement / Termination Benefit with death benefits 2x salary o Added cost: JPY 1.62 million/year The current retirement lump sum plan is ‰ Housing Plan: unfunded and book reserved. Prior to 2001 o Increase maximum rent cap by there had been corporate tax breaks for the approx. JPY 10,000 monthly book reserve for retirement / termination lump sum, but it was abolished and now the reserve is taxable. Although currently there are only 8 employees who are eligible for benefits, the number as well as the accrued benefits (liability) will increase as many of the new hires attain eligibility. As the number of employees attaining the eligibility for benefits will increase, the exposure to future liabilities will become a serious problem if ABC Japan continues the current unfunded benefit arrangement. It is advisable to switch to the DC plan within a year or two. The charts below show an estimated increase in the plan liability based on the existing employee data (assuming no new hires, no terminations, no salary increases). # of eligible employees accrued liability (Million yen) 60 90 eligible employees 80 50 accrued benefits 70 40 60 30 50 40 20 30 10 20 10 0 0 Dec. 2004 Dec. 2005 Dec. 2006 Dec. 2007 ABC Japan Co. Ltd. Page B - 13
JAPAN Recommendations Defined Contribution (DC) Trend in Japan Since the new laws were implemented in 2001, there has been steady increase in the number of Defined Contribution pensions in Japan. As of January 2005, 1,260 Defined Contribution plans were in place, representing nearly 3,800 employers in Japan. The concept of a DC plan in Japan was enacted in October 2001. There are 2 types, a company-sponsored type and an individual contribution type. The plan participants can receive benefits from age 60 if they have been making contribution for 10 years or more. Withdrawals before age 60 are only permitted in case of death or severe disability. A choice of at least three investment vehicles must be given to the plan participants and one of these must be a guaranteed fund. The Employer must explain to the plan participants why the Employer selected the investment vehicles. Each plan participant directs his/her own asset management personally and must be allowed to change funds once or more every three months. An employee changing jobs is allowed to transfer funds to a new plan if he or she has been a member of the previous DC plan for at least three years. Other Plan features include: ‰ Contributions: DC plan contribution rate ranges between 7% and 10% depending on industry, which is usually set based on the existing DB plan benefits. However, the tax free contributions are capped at JPY 552,000 per annum, and a contribution over the cap is not permitted even on a taxable basis, and it accepts the employer contributions only. Since the cap is still low, many companies pay out the amount over the cap monthly as a top up on salary, or set up a book reserve plan that pays the amount equivalent to the loss as a lump sum when the employees leave the company. ‰ Vesting Schedule: Maximum 3 year vesting is allowed for the DC plan, which can either st nd rd be a cliff vesting (1 & 2 year are zero and 100% at the 3 year), or a gradual vesting. ‰ Employee Taxation: The DC contributions are not considered as employee’s income. The DC account is portable to a new employer DC plan and employees cannot take the money out until age 60. But when they withdraw their money after age 60, the lump sum is given a retirement income tax deduction and the pension a miscellaneous income tax deduction. The lump sum paid by the Book Reserve plan is also subject to a retirement income tax deduction while if the amount over the DC cap is paid as monthly / annual salary, it affects the employee’s income tax status and also increases the social security premiums for both the employer and employee. Life Insurance ABC may also wish to consider implementing a Group Life/AD&D scheme to remain competitive. Suggested parameters would be 2x annual base salary, capped at JPY 20-40 million for Life, with an additional 1 or 2 x annual base capped at JPY 10 million for AD&D. The estimated cost of adding this benefit would be about JPY 1.62 Million per year* given the current group size. *2 x annual base capped at 40 million for Life, and 2x annual salary capped at 10 million for AD&D rider. ABC Japan Co. Ltd. Page B - 14
JAPAN Recommendations Housing Allowance Under the current ABC Japan housing plan for relocated employees, ABC signs the lease and deducts a percentage of the rent from the employee’s salary. However, the maximum rent seems a little low, which may indicate it has not been adjusted in keeping with the real estate market price for a while. To bring this benefit back in line with current market conditions, ABC may wish to consider raising the cap by JPY 10,000. ABC Japan Co. Ltd. Page B - 15
UNITED KINGDOM Company Profile COMPANY PROFILE Local Name: ABC UK Ltd Location: London Headcount: 2 Salaried, 20 Staff Payroll: Not available Contact: Gregory Mathers, Jerry Gardner Currency: United Kingdom Pounds (GBP 1 = USD 1.89) ABC UK Ltd Page C - 1
UNITED KINGDOM Existing Benefits SUMMARY OF EXISTING BENEFITS (all values in Pounds Sterling - GBP 1 = approx. USD 1.89) Overview of Private Benefit Plans Provided Type of Plan Plan Exists? Plan participation is Yes No Voluntary Mandatory Defined Benefit Pension X Defined Contribution Pension X Individual Pension X Stakeholder Pension X Life Insurance X Short Term Disability X Long Term Disability (PHI) X Medical Plan X X Dental insurance X Critical Illness / Personal Accident X Defined Contribution Pension Policy Details Effective Date 1998 (est.) Recent Changes None Pension Provider Standard Life Broker / Independent Financial Advisor N/A Investment Managers N/A Commissions Payable? N/A Eligibility Details Plan Participation Voluntary, available to all employees Eligibility Requirements Immediate eligibility at hire for all employees in covered group - Minimum Entry Age None - Maximum Entry Age None Benefit And Contribution Details Covered Pensionable Earnings Definition Base salary excluding bonus & shift allowance Normal Retirement Eligibility Age 65 (males and females) Benefits Payable Upon Retirement, Death Benefit Payment Options Combination of Periodic Payments, Lump Sum Employer Contributions 7% Employee Contributions 5% Life Insurance Plan Details Risk Financing Direct disbursement through payroll Employees Currently Enrolled N/A st Renewal date 1 January ABC UK Ltd Page C - 2
UNITED KINGDOM Existing Benefits Eligibility Details Plan Participation All permanent employees Eligibility Requirements Immediate eligibility at hire for all employees in covered group Benefit And Contribution Details Benefit Payable 4 x DIS (basic salary if in service) Other benefits 33% widows / widowers Additional Benefits 3 x DIS Long Term Disability Plan Plan Details Risk Financing Direct disbursement through payroll Employees Currently Enrolled N/A Eligibility Details Plan Participation All employees Eligibility Requirements Immediate eligibility at hire for all employees in covered group Benefit And Contribution Details Benefit Payable 70% basic salary less SSPB Social Security Payments Taken into account Waiting Period 26 weeks Maximum Benefit Period N/A Exclusions N/A Employer Contributions N/A Employee Contributions N/A Medical Insurance Policy Details Risk Financing Direct disbursement through payroll Current Enrollment N/A PMI Provider PPP Eligibility Details Plan Participation Available to all employees Eligibility Requirements Immediate eligibility at hire for all employees in covered group Dependent Coverage - Employee - Single parent - Domestic Partner - Dependants Retiree Coverage? N/A ABC UK Ltd Page C - 3
UNITED KINGDOM Existing Benefits Premium Financing Details Employee Contributions None Tax Treatment Details Is the premium tax deductible for the employer? Yes Is the premium paid by the employer in respect of an employee taxable to the employee? Yes Is the premium paid by the employee (if any) tax deductible to the employee? N/A ABC UK Ltd Page C - 4
UNITED KINGDOM Benchmark Analysis BENCHMARK ANALYSIS Benefits Commonly Available Quick Scorecard The United Kingdom benefits structure can be separated into 3 Benefits Offered distinct areas or "pillars" – State, Employer and Personal. The Pension: Y √ UK Social Security system provides retirement pensions and Life: Y √ benefits for widows, sickness, unemployment, pregnancy and Disability: Y √ disability. Medical: Y √ Most individuals will not regard the benefit structure supplied by Y Typical Private Benefits the Government to be sufficient to meet their needs both during N Not Typical and after their working lives. It is, therefore, very common for √ Currently Provided employers to provide a second “pillar” of benefits. Employers X Currently Not Provided generally provide four types of private employee benefits, in the following order of priority: pension, life, disability and medical. ABC vs. Benchmarks Business Travel Accident is typically offered on a local or global Pension: ▼ Life: ▲ basis. Noninsurance benefits among multinational technology Disability: ‘ companies may also include education assistance and stock Medical: ▲ purchase. Overall: ▲ Most benefits supplied by employers to their employees are regarded as benefits in kind, in lieu of pay or as deferred pay. As ▲▲ Significantly Above such, most benefits, other than pension benefits, have tax ▲ Moderately Above consequences for the employee. ‘ Meets Benchmarks ▼ Moderately Below As noted earlier, ABC UK Ltd provides the following benefits to ▼▼ Significantly Below all employees: ‰ Defined contribution (DC) pension (with death benefits) ‰ Individual pension ‰ Life insurance (4 X DIS) ‰ Long term disability ‰ Medical plan (Up to family cover) ‰ Critical Illness / Personal Accident Insurance ‰ Holidays (over and above statutory) ABC UK provides statutory severance pay + 1 week / year based on basic salary (no fixed policy). They are covered by the UK social security retirement system. Overview of Benchmark Analysis In general, employee benefits provision in the United Kingdom varies primarily by level of employee and size of organization, and less so by industry and location. For this reason, our benchmark analysis has compared ABC UK with UK firms of similar size and employee classifications structure. ABC UK Ltd Page C - 5
UNITED KINGDOM Benchmark Analysis Our report, therefore, provides a 'typical' benefits package across a range of benefits for each level of employee in the relevant size classification for ABC UK. With the move towards ‘total reward’ and the growing increase in flexible benefits, we have also conducted a full benefits review for each of the categories below (in the Appendix) for your information. Data on ABC’s Short Term Disability and Individual Pension plans was not provided during the interview and therefore could not be analyzed in detail. Classification Categories ‰ Level of Employee typically falls into 5 categories: 1. Managing Director (MD) 2. Director 3. Clerical 4. Operatives 5. Other ranks ‰ Size Classifications: Size classifications in the UK typically fall into 3 categories: 1. Small Companies (Revenues < GBP 25 million) 2. Medium Companies (Revenues GBP 25 - 200 million) 3. Large Companies (Revenues > GBP 200 million) Benchmarking Methodology We have evaluated both Small and Large Company sizes in relation to ABC UK for this exercise. This is because ABC falls into our Small Company classification but competes against companies where a Large Company classification might be more appropriate. Benchmarking data were derived from our database of Small, Medium and Large Corporate Services companies. The following tables show a comparison of benefits provided by ABC UK compared to those large and small companies surveyed. It does not include benefits not provided by ABC UK. Definitions of Terms Used In this analysis we benchmarked certain key features of ABC UK’s Defined Contribution Pension (DC) (also referred to as money purchase), Individual Pension (IP), Medical cover (PMI), Long Term Disability (PHI), Life Insurance cover (Life Assurance), and Holiday policy. The table on the next page defines the benchmarking categories used in this analysis. ABC UK Ltd Page C - 6
UNITED KINGDOM Benchmark Analysis There is insufficient data to run any comparisons on Critical Illness / Personal Accident Insurance. Provide a DC This is the % of companies that provide a DC to this group DC Employer This is the average employer contribution to the DC DC Employee This is the average employee contribution to the DC Provide an IP This is the % of companies that provide a IP to this group IP Employer This is the average employer contribution to the IP IP Employee This is the average employee contribution to the IP PMI Single This is the % of companies that pay for single PMI cover PMI Full This is the % of companies that pay for full PMI cover PHI This is the % of companies that provide PHI to this group Holidays This is the average number of holidays given NRA This is the average normal retirement age Life Assurance This is the average level of life assurance cover Where data has not been provided or could not be substantiated N/A is entered. ABC UK vs. Large Companies Benefit ABC UK MD Director Clerical Operative Other Ranks Provide DC Yes 26% 26% 10% 31% 22% DC Employer 7% 10% 10% 4% 5% 4% DC Employee 5% 5% 5% 6% 6% 6% Provide IP Yes 14% 14% N/A N/A N/A IP Employer N/A 10% 10% N/A N/A N/A IP Employee N/A 5% 5% N/A N/A N/A PMI Single Core 13% 13% 54% 45% 82% * PMI Full Core 81% 81% N/A N/A N/A PHI Yes 88% 77% 45% 19% 54% Holidays N/A 25 25 20 25 25 NRA 65 61 61 N/A N/A N/A Life Assurance 4 x DIS 4 x DIS 4 x DIS 3 x DIS 3 x DIS 4 x DIS * This is a lower level of PMI to the others, the majority being based on a cash plan scheme rather than a structured PMI scheme. ABC UK Ltd Page C - 7
UNITED KINGDOM Benchmark Analysis Results of Analysis Based upon this analysis, we would like to share the following observations/conclusions regarding ABC UK’s current program as it compares to other Large Companies in the UK: ‰ Pension o ABC UK is among the 10% to 31% of Large Companies in the UK who provide a Defined Contribution Pension (DC). o Their contribution level of 5% is lower than most employers for senior employees, who contribute 10% for this category. At lower employee levels they are above market norm, contributing 7% compared with a range of 6% to 5%. o ABC UK is among the 14% of Large Companies in the UK who provide an individual Pension (IP) to their senior employees. (Contribution rates are not available for comparison.) o Their normal retirement age is above the market norm at senior employee level ‰ Life o ABC UK offers life assurance paying out at 4 x DIS which is on par with Large Companies for senior employees and above market norm for other employees. ‰ Long Term Disability (PHI) o ABC UK does offer PHI, which is the norm for senior employees of Large Companies. o ABC UK also offers PHI at lower levels, which is above market norm compared to Large Companies. ‰ Medical (PMI) o At the lower employee levels, ABC UK is better than most Large companies in their provision of PMI. o At senior levels they are on par with the market norm as most of the large companies offer their senior employees full PMI (i.e., family coverage). ‰ Vacation and Critical Illness / Personal Accident Insurance o There is insufficient data to run any comparisons for these benefits. ABC UK Ltd Page C - 8
UNITED KINGDOM Benchmark Analysis ABC UK vs. Small Companies Benefit ABC UK MD Director Clerical Operative Other Ranks Provide DC Yes 8% 8% 24% 19% 19% DC Employer 7% 10% 10% 4.5% 4% 4% DC Employee 5% 5% 5% 8% 5% 5% Provide IP Yes 37% 37% N/A N/A N/A IP Employer N/A 10% 10% N/A N/A N/A IP Employee N/A 5% 5% N/A N/A N/A PMI Single Core 20% 52% 32% 29% 29% PMI Full Core 80% 48% N/A N/A N/A PHI Yes 48% 48% 21% 21% 21% Holidays N/A 25 25 25 25 25 NRA 65 62 62 N/A N/A N/A Life Assurance ** 4 x DIS 4 x DIS 4 x DIS 4 x DIS 4 x DIS 4 x DIS ** The average number of companies offering this benefit was approximately 40% Results of Analysis Based upon this analysis, we would like to share the following observations/conclusions regarding ABC UK’s current program as it compares to other Small Companies in the UK: ‰ Pension o ABC UK is among the 8% to 19% of Small Companies in the UK who provide a Defined Contribution Pension (DC) o Their contribution level of 7% is lower than most employers for senior employees who contribute 10%. At lower levels they are above market norm contributing 7% compared with a range of 6% to 5%. o ABC UK is among the 37% of Small Companies in the UK who provide an individual Pension (IP) to their senior employees. (Contribution rates are not available for comparison.) o Their normal retirement age is above the market norm at senior employee level (65 vs. the more typical 62). ‰ Life o ABC UK offers life assurance paying out at 4 x DIS which is on par with Small Companies for all employees. ‰ Disability (PHI ) o ABC UK does offer PHI, which is above the norm for all employees compared to Small companies. ABC UK Ltd Page C - 9
UNITED KINGDOM Benchmark Analysis ‰ Medical (PMI) o At the lower employee levels, ABC UK is better than most Small companies in their provision of PMI. o At senior levels they are on par with the market norm as most of the Small companies offer their senior employees full PMI (i.e., family coverage). ‰ Vacation and Critical Illness / Personal Accident Insurance o There is insufficient data to run any comparisons for these benefits. Conclusions and Observations As the above analysis indicates, ABC UK Ltd’s employee benefits program has competitive strengths and weaknesses when compared with its peers. Pension ABC UK’s practice of providing a Defined Contribution Pension (DC) scheme ranks favorably against other Large and Small Companies. However, their contribution level of 7% is lower than most employers for senior employees, who more commonly contribute 10%. At lower levels they are above market norm contributing 7% compared with a range of 6% to 5%. ABC also ranks rank favorably against other Large and Small Companies in terms of providing Individual Pensions. There was insufficient data to compare contribution rates. ABC UK’s normal retirement age (65) is somewhat higher than the more typical age of 61 or 62 for senior executives. Life/Accident ABC Ltd, who offers four time’s salary, is slightly above norm compared with most UK Large Companies who offer life insurance coverage at a rate of three or four times salary. Among Small Companies this benefit is not as prevalent, but 40% of employers do offer life insurance, typically at a rate of four times salary. Disability The vast majority of Large Companies, and about half of Small Companies, offer PHI (Long Term Disability) coverage for their most senior employees. Providing this benefit for lower level employees is much less prevalent. Because ABC UK provides this benefit at any employee level, we conclude it meets benchmarks in this category. ABC UK Ltd Page C - 10
UNITED KINGDOM Benchmark Analysis Medical Large Companies typically provide “Full” PMI (i.e., family coverage) to senior employees, and roughly half offer “Core” PMI (i.e. individual) for other employees. Small Companies follow a similar tactic, but less than a third provides PMI at the lower levels. Therefore, by providing full “Core” PMI to all employees, ABC UK ranks above benchmarks at the lower levels and on par with benchmarks at the higher levels. Overall, we conclude that ABC UK’s current program falls moderately above benchmarks at this time. ABC UK Ltd Page C - 11
UNITED KINGDOM Recommendations RECOMMENDATIONS Employee benefit policies can vary significantly Recommendations at a Glance from company to company based on corporate philosophy, competitive situation and sensitivity ‰ Defined Contribution Pension (DC): to cost, among other factors. While the o Consider increasing employer recommendations presented in this section will contributions discuss plan design changes needed to bring ABC UK’s employee benefits plan in line with ‰ Individual Pension (IP): local trends and customs, ultimately the o Carry out in depth market review decision to implement these changes will require internal review and discussion. ‰ Life/Accident: o Keep current provision to improve Defined Contribution Pension (DC) competitiveness ABC UK’s existing 5% employer contribution ‰ Disability (PHI): level is relatively competitive for most o Keep current provision to improve employees but lower than the norm at the competitiveness senior levels. To bring other features of this ‰ Medical (PMI): pension plan more in line with other UK o Keep current provision to improve companies, and thus make the plan more competitiveness attractive for other employees, ABC UK may wish to consider increasing its contributions. ‰ Vacation and Critical Illness / Personal Accident Insurance: Individual Pension (IP) o Carry out in depth market review ABC already offers this popular benefit, which ‰ Multinational Pooling is positive. In fact, it may be worthwhile to o Consider pooling the Life/Accident and Disability cover conduct a more detailed review of this benefit at a later time, including a competitive analysis of ‰ Broker Relationships: rates and investments. o Consider utilizing broker or consultant Life/Accident UK employees frequently consider life insurance an important and valuable benefit, with typical benefit levels ranging between 3x salary (for lower level employees) and 4x salary (for senior employees). This is a valuable benefit for ABC to maintain, as it will help improve its competitiveness in the market. Long Term Disability (PHI) Because social security provides modest disability benefits, the financial impact of long-term disability is felt most strongly among the most highly compensated employees. By continuing to offer this benefit to all employees ABC is again increasing their competitiveness. Medical (PMI) ABC UK’s current plan provides full “Core” PMI benefits to employees at all levels. For lower level employees this would be considered attractive, and is on par with norms for more senior ABC UK Ltd Page C - 12
UNITED KINGDOM Recommendations employees who may be accustomed to receiving “Full” PMI benefits. By continuing to offer this benefit to all employees ABC is again increasing their competitiveness. Vacation and Critical Illness / Personal Accident ABC may wish to carry out a more detailed assessment of these benefits, as they are both important. Multinational Pooling Given ABC UK’s international presence and ABC UK’s headcount, it may be advantageous to form a multinational pool that can include ABC UK’s Life and Disability benefits (if implemented). As the final phase of the Global Benefits Assessment, Globex will study the potential cost and administration benefits this approach could bring to ABC UK on a global scale. Broker Relationships No information was provided about current broker relationships for any benefits currently provided. This could be an indication that ABC UK has worked directly with insurers to develop its current benefits package. While this practice is not uncommon, utilizing a qualified Employee Benefits broker or consultant can offer some critical advantages. First, this approach enables companies to periodically obtain competitive bids for those benefits, which can secure the most competitive rates for those benefits. In addition, an intermediary can keep companies abreast of new developments or changing trends in the marketplace, and help them adjust their benefits scheme to adapt to changing requirements. If ABC UK is not currently utilizing the services of a broker or consultant, this may be a good time to reconsider this approach. ABC UK Ltd Page C - 13
Japan The maximum monthly earnings for contribution and benefit Japan purposes are 620,000 yen. Exchange rate: US$1.00 equals 110.19 yen. The minimum and maximum earnings levels are adjusted on an ad hoc basis in line with the increase in the national average wage. Old Age, Disability, and Survivors Self-employed person National pension program: 13,300 yen per month. Regulatory Framework Employees’ pension insurance: Not applicable. First law: 1941 (employees’ pension insurance). Employer Current laws: 1954 (employees’ pension insurance) and 1959 National pension program: The contribution is included in the (national pension), with 1985 amendment. employer contribution to the employees’ pension insurance or Type of program: A social insurance system involving a flat- other employment-related program. A proportionate amount is rate benefit for all residents under the national pension transferred to the national pension program. program and earnings-related benefits under the employees’ Employees’ pension insurance: 6.79% of monthly payroll pension insurance program or other employment-related including salary bonuses before tax, according to 30 wage program. classes; contributions for miners and seamen, 7.48% of payroll Note: The provisions and rates are effective as of April 1, 2004. including salary bonuses before tax, according to 30 wage classes. Coverage If the employer is contracted-out, the contribution is between National pension program: Residents aged 20 to 59; 5.29% and 5.59% of monthly payroll including salary bonuses voluntary coverage for residents aged 60 to 64 (aged 65 to 69 before tax. in special cases) and for citizens residing abroad (aged 20 to The minimum monthly earnings for contribution and benefit 64). purposes are 98,000 yen. Employees’ pension insurance: Employees of firms in The maximum monthly earnings for contribution and benefit industry and commerce, including seamen. (Partial purposes are 620,000 yen. contracting-out from employees’ pension insurance is allowed The minimum and maximum earnings levels are adjusted on an if corporate plans provide equivalent or higher benefits.) ad hoc basis in line with the increase in the national average Special employment-related schemes for civil servants and wage. private-school employees. Government Source of Funds National pension program: One-third of the cost of benefits, plus 100% of administrative costs. Insured person Employees’ pension insurance: The cost of administration. National pension program: The contribution is included in the insured person’s contribution to the employees’ pension Qualifying Conditions insurance or other employment-related program. A proportionate amount is transferred to the national pension Old-age pension program. National pension program: Age 65 with a minimum of 25 years All other insured persons contribute 13,300 yen a month. of contributions (the coverage period can include years of Low-income spouses of workers insured under the coverage under any employment-related program belonging to employment-related program may apply for exemption from the insured’s dependent or common-law spouse). There is no payment. requirement to cease employment, and the pension is not Employees’ pension insurance: 6.79% of basic monthly earnings tested. earnings and salary bonuses before tax, according to 30 wage Early pension: An early pension is payable between ages 60 classes; miners and seamen contribute 7.48% of basic monthly and 64. There is no requirement to cease employment, and the earnings including salary bonuses before tax, according to pension is not earnings tested. 30 wage classes. Deferred pension: The pension may be deferred up to age 69. If the employer is contracted-out, the contribution is between Dependent supplement: No supplements are paid for a spouse 5.29% and 5.59% of monthly earnings including salary or children. (If the insured receives a supplement for a spouse bonuses before tax. under the employees’ pension insurance scheme, when the The minimum monthly earnings for contribution and benefit spouse reaches age 65 he or she will receive a pension under purposes are 98,000 yen. the national pension program equal to the employee’s pension
Japan insurance supplement. The spouse must not qualify for a Eligible survivors include the widow living with, and caring for, national pension in his or her own right.) the deceased’s children up to the end of the fiscal year in Employees’ pension insurance: Age 60 (age 55, for seamen which the child reaches age 18 (age 20 if disabled), and the and miners) with 25 years of coverage. There is no requirement children of the deceased up to the end of the fiscal year in to cease employment. The pension is reduced if the pension which the child reaches age 18 (age 20 if disabled). and salary combined exceed a certain limit. The reduction is Death grant (national pension program): The deceased was greater for those aged 60 to 64 than for those aged 65 to 70. not an old-age or disability pensioner at the time of death and Dependent supplement: Payable for a dependent spouse had paid at least 3 years of contributions. under age 65. When the spouse reaches age 65 and receives a Employees’ pension insurance: The deceased satisfied the pension in his or her own right under the national pension conditions for the old-age or disability (Class I or II) pension or program, the supplement ceases. Payable for children up to was insured at the time of death with contributions paid or the end of the fiscal year in which they reach age 18 (age 20 if credited during 2/3 of the period between age 20 and the date disabled). of death. Disability pension Eligible survivors may include a widow, a widower older than National pension program: Total disability requiring constant age 55, children or grandchildren up to the end of the fiscal attendance (Class I) or a degree of disability that severely year in which the child reaches age 18 (age 20 if disabled), and restricts the person’s ability to live independently (Class II). parents or grandparents older than age 55, if they were Contributions must have been paid or credited during 2/3 of financially dependent on the deceased at the time of death. the period between age 20 and the onset of disability. Credited The pension is paid to the first eligible survivor in the contributions may be awarded to low-income or disabled following order of priority: widowed mother, children, childless persons or for those receiving public aid. The pension amount widow, widower, parents, grandparents, and grandchildren. is reduced for credited contribution periods. Dependent supplement: Paid to a surviving parent or the Dependent supplement: Payable for children up to the end of eldest child for children up to the end of the fiscal year in the fiscal year in which they reach age 18 (age 20 if disabled). which the child reaches age 18 (age 20 if disabled). Employees’ pension insurance: Total disability requiring Old-Age Benefits constant attendance (Class I) or a degree of disability that severely restricts the person’s ability to live independently National pension program (old-age): If fully insured (Class II). Contributions must have been paid or credited (480 months of paid contributions), the pension is 794,500 yen during 2/3 of the period between age 20 and the onset of a year. If not fully insured, the pension is reduced disability. Credited contributions may be awarded to low- proportionately according to the number of contributions paid income or disabled persons or for those receiving public aid. and credited. The pension is paid every 2 months. The pension amount is reduced for credited contribution Early pension: For those born on or after April 2, 1941, the periods. A pension (Class III) may be awarded for a disability reduction is 0.5% times the number of months between the less severe than that of Class II. date of application and age 65. For older cohorts, the benefit is Dependent supplement: Payable to persons with a Class I or II actuarially reduced by between 42% and 11%, depending on disability for a dependent spouse under age 65. When the the age at which the pension is taken between ages 60 and 64. spouse reaches age 65 and receives a pension in his or her Deferred pension: For those born on or after April 2, 1941, the own right under the national pension program, the supplement increase is 0.7% times the number of months between age 65 ceases. and the month of application. For older cohorts, the pension Disability grant (employees’ pension insurance): Payable for due at age 65 is increased by between 12% and 88%, an assessed degree of disability lower than Class III. depending on the age at which the pension is taken between Contributions must have been paid or credited during 2/3 of ages 66 and 70. the period between age 20 and the onset of disability. Credited Dependent supplement: Paid directly to a qualifying spouse contributions may be awarded to low-income or disabled aged 65 or older. The supplement ranges from 15,300 yen to persons or for those receiving public aid. The pension amount 228,600 yen a year, depending on the spouse’s age. is reduced for credited contribution periods. Benefit adjustment: Automatic annual adjustment for changes Survivor pension in the cost of living. National pension program: The deceased was an old-age or Employees’ pension insurance (old-age): The insured’s disability pensioner or was insured at the time of death with indexed average monthly wage over the full career times a contributions paid or credited during 2/3 of the period between coefficient determined by the insured’s date of birth times the age 20 and the date of death. number of months of coverage. The pension is paid every Dependent supplement: Payable for children up to the end of 2 months. the fiscal year in which they reach age 18 (age 20 if disabled). Pensioners between ages 60 and 64 receive an additional 1,676 yen a month for each month of coverage. (This
Japan additional amount is replaced by the national pension at Full orphan: The benefit is the same as for a widow plus age 65.) dependent supplements and is divided equally among all Working pensioner: The pension is reduced by 20% for eligible orphans. continued employment between ages 60 and 64 if the combined Benefits are paid every 2 months. total of the monthly wage and 80% of the pension is under Death grant: A lump sum of between 120,000 yen and 280,000 yen; if the combined total is between 280,000 yen and 320,000 yen, according to the length of the period of paid 480,000 yen, the pension is reduced by 1 yen for every 2 yen contributions between 3 and 35 years. earned; if the combined total exceeds 480,000 yen a month, the Benefit adjustment: Automatic annual adjustment for changes pension is reduced by 100% of wages over 480,000 yen. in the cost of living. Dependent supplement: 228,600 yen a year for a spouse; Employees’ pension insurance (survivor): 75% of the old- 228,600 yen a year for each of the first two children and age pension is payable for the death of an insured worker. The 76,200 yen a year for each subsequent child up to the end of pension is paid to the first eligible survivor in the following the fiscal year in which the child reaches age 18 (age 20 if order of priority: widowed mother, children, childless widow, disabled). widower, parents, grandparents, and grandchildren. Benefit adjustment: Automatic annual adjustment for changes Dependent supplement: 228,600 yen a year for each of the first in the cost of living. two children and 76,200 yen for each additional child up to the Permanent Disability Benefits end of the fiscal year in which the child reaches age 18 (age 20 if disabled). If there are no children, a supplement of National pension program (disability): 993,100 yen a year for 596,000 yen a year is paid for a widow between ages 40 and 65 a Class I disability or 794,500 yen a year for a Class II disability. if she was aged 35 or older when the insured died. Dependent supplement: 228,600 yen a year for each of the first Benefits are paid every 2 months. two children and 76,200 yen a year for each subsequent child Benefit adjustment: Automatic annual adjustment for changes up to the end of the fiscal year in which the child reaches in the cost of living. age 18 (age 20 if disabled). Benefits are paid every 2 months. Administrative Organization Benefit adjustment: Automatic annual adjustment for changes Pension Bureau of the Ministry of Health, Labor, and Welfare in the cost of living. (http://www.mhlw.go.jp) provides general supervision of both Employees’ pension insurance (disability): For a Class I programs. disability, 125% of the old-age pension plus additional benefits Social Insurance Agency (http://www.sia.go.jp) administers for dependents; for Class II, 100% of the old-age pension plus both programs nationally. additional benefits for dependents; and for Class III, 100% of Regional Social Insurance Bureaus and Social Insurance the old-age pension. For younger disabled persons with less Offices (part of the Social Insurance Agency) administer than 300 months of coverage, the contribution period is contributions and benefits for both programs locally. counted as 300 months. The minimum benefit is 596,000 yen a year. Sickness and Maternity The maximum benefit is based on the earnings limit for contribution purposes according to the wage class. Regulatory Framework Dependent supplement: 228,600 yen a year for a spouse. First and current laws: 1922 (employees’ health insurance), Benefits are paid every 2 months. implemented in 1927, with 1997 and 2000 amendments; 1938 Disability grant: A lump sum equal to 200% of the old-age (national health insurance), with 1958 and 1998 amendments; pension. The minimum lump sum is 1,206,400 yen. and 1982 (medical system for the elderly), implemented in 1983. Benefit adjustment: Automatic annual adjustment for changes Type of program: Social insurance system. in the cost of living. Survivor Benefits Coverage National health insurance: All residents not covered under National pension program (survivor): 794,500 yen a year for employment-related health insurance or special schemes are a widow. (No benefit is payable for a widower.) covered under local government programs operated at the Dependent supplement: 228,600 yen a year for each of the first municipality, township, or village level. two children and 76,200 yen a year for each additional child up Special national health insurance societies provide coverage to the end of the fiscal year in which the child reaches age 18 for self-employed persons. (age 20 if disabled).
Japan Employees’ health insurance: Employees of firms in Government industry and commerce with five or more employees are National health insurance: 50% of the cost of medical care, covered by the government-managed program, unless the the cost of administration, and some local subsidies. insured is a member of an occupational health insurance Employees’ health insurance: 13.0% of benefit costs, 16.4% society. of the cost of health care for the aged, and the cost of Voluntary coverage for employees in private-sector workplaces administration for the government-managed program as well as with less than five workers and for agricultural, forestry, or part of the cost of administration for health insurance societies. fishery workers. Special systems for persons aged 70 or older (medical system Qualifying Conditions for the elderly), seamen, private-school employees, and civil servants. National health insurance (medical benefits): Residence in a municipality, township, or village. Source of Funds Employees’ health insurance (sickness, maternity, and Insured person medical benefits): In covered employment. If an insured person leaves employment but was in covered employment National health insurance: National health tax or premium is during the previous 12 months, sickness and maternity fixed by the individual carrier but must not exceed 530,000 yen benefits are continued for the normal duration of entitlement; a year per household. (The average annual contribution in medical care for the same insured person can be provided for 2000 was 82,954 yen per insured person, or 166,990 yen per up to 5 years from the first date of treatment. household.) Eligible dependents for medical benefits are spouses, parents, Premiums may be reduced by between 30% and 70% for grandparents, younger sisters and brothers, children, and qualifying low-income residents or for households in a grandchildren whether or not residing with the insured person; program run by a municipality. and fathers and mothers-in-law, uncles, aunts, nephews, Employees’ health insurance: 4.1% of the basic monthly nieces, and older brothers and sisters, provided they are earnings including salary bonuses before tax, according to residing with the insured person. 39 wage classes (government-managed program). The annual Birth grant: Paid to an insured person or the wife of an average contribution in 1999 was 3.72% of basic monthly insured person whose pregnancy lasts 4 months or more. earnings including salary bonuses before tax, according to 39 Funeral grant: Paid to the person who organizes the funeral wage classes (health insurance society). of the deceased insured. The minimum monthly basic wage for contribution and benefit purposes is 92,000 yen. Sickness and Maternity Benefits The maximum monthly basic wage for contribution and benefit National health insurance: No cash benefits are provided by purposes is 980,000 yen. law, but all insurance carriers provide lump-sum death and birth The minimum and maximum earnings levels are adjusted on an grants. ad hoc basis in line with any increase in the national average Employees’ health insurance (sickness benefit): 60% of wage. the average daily basic wage, according to wage class. The Self-employed person: Covered by special national health benefit is payable after a 3-day waiting period for up to insurance societies. 18 months or until the determination of disability. Health Employer insurance societies may provide more generous benefits. National health insurance: None. Maternity benefit: 60% of the average daily basic wage according to wage class is paid for 42 days before (98 days for Employees’ health insurance: 4.1% of the basic monthly expected multiple births) and 56 days after the expected date of payroll including bonuses before tax, according to 39 wage childbirth. The payment of benefit is discontinued or reduced classes (government-managed program). The annual average partially if the mother is receiving a wage or cash sickness contribution in 1999 was 4.786% of basic monthly payroll benefit. including bonuses before tax, according to 39 wage classes Birth grant: A lump sum of 300,000 yen. (health insurance society). Funeral grant: A lump sum of 100,000 yen is paid to a The minimum monthly basic wage for contribution and benefit deceased person’s dependent who organizes the funeral. If purposes is 92,000 yen. there is no dependent, the actual funeral expenses up to the The maximum monthly basic wage for contribution and benefit limit of the deceased’s basic wage for contribution purposes is purposes is 980,000 yen. paid to the person who organizes the funeral. The minimum and maximum earnings levels are adjusted on an ad hoc basis in line with any increase in the national average wage.
Japan Workers’ Medical Benefits Work Injury National health insurance: Medical care and treatment is Regulatory Framework usually provided by clinics, hospitals, and pharmacists under contract with, and paid by, the insurance carrier (some carriers First law: 1911. provide services directly through their own clinics and Current law: 1947 (workmen’s accident compensation hospitals). Benefits include medical treatment, surgery, insurance), with 1980, 1986, 1995, and 2000 amendments. hospitalization, nursing care, dental care, maternity care (only Type of program: Social insurance system. for a difficult childbirth), and medicines. There is no limit to duration. Coverage Cost sharing: The amount depends on the person’s age: under age 3, 20% of the cost; ages 3 to 69, 30% of the cost; aged 70 Employees of all firms in industry and commerce not included or older, 10% of the cost or 20% for those with an income of under voluntary coverage or special schemes. 1,240,000 yen or more. Voluntary coverage for employees in agricultural, forestry, and Inpatients also pay a daily fee toward the cost of food. The fishery establishments with less than five workers. daily fee for food depends on family income and the duration Special systems for seamen and civil servants. of the hospital stay. Employees’ health insurance: Medical benefits are the same Source of Funds as under national health insurance. Cost sharing: The amount depends on the person’s age: under Insured person: None. age 3, 20% of the cost; ages 3 to 69, 30% of the cost; aged 70 Self-employed person: Not applicable. or older, 10% of the cost or 20% for those with an income of Employer: 0.55% to 13.5% of payroll, according to a 3-year 1,240,000 yen or more. accident rate. Inpatients also pay a daily fee toward the cost of food. The Government: Subsidies, set within the limits of the national daily fee for food depends on family income and the duration budget. of the hospital stay. Dependents’ Medical Benefits Qualifying Conditions National health insurance: Same as for the insured person. Work injury benefits: There is no minimum qualifying period. Employees’ health insurance: Same as for the insured Temporary Disability Benefits person. 60% of the insured’s average daily wage in the preceding Administrative Organization 3 months plus a temporary disability supplement equal to 20% of the insured’s average daily wage. The benefit is payable Health Insurance Bureau of the Ministry of Health, Labor, and after a 3-day waiting period until the end of the 18th month (the Welfare (http://www.mhlw.go.jp) supervises both programs. employer pays 60% of the average daily wage for the first National health insurance: Local administration is provided 3 days). mainly by municipal health insurance funds. The National The minimum daily benefit is 4,160 yen. Health Insurance societies provide administration for some The maximum daily benefit is 23,620 yen. insured persons, including the self-employed. National Health Benefit adjustment: Automatic quarterly adjustment for wage Insurance provides medical benefits. changes higher than 10% from the previous quarter. Employees’ health insurance: Social Insurance Agency From the 19th month, less severely disabled persons receive (http://www.sia.go.jp) provides the national administration for the same level of benefit as before until recovery; more the government-managed program. Regional Social Insurance severely disabled persons receive the injury and disease Bureaus and Social Insurance Offices administer the program compensation pension (annual benefit is equal to 100% of the locally. Employees’ Health Insurance provides cash and average daily wage in the preceding 3 months multiplied by medical benefits. For programs managed by Health Insurance between 245 and 313 days until recovery, according to the Societies, insurance divisions of prefecture departments and degree of disability), plus a special supplement based on the 1,756 Health Insurance Societies provide local administration worker’s annual salary bonus. for affiliated workers. Benefits are paid every 2 months. Benefit adjustment: Automatic annual adjustment for wage changes.
Japan Permanent Disability Benefits the program through prefecture labor standards offices and Permanent disability pension: Seriously disabled persons local labor standards inspection offices. (assessed according to grades 1 to 7 of disability) receive an Unemployment annual pension of between 131 and 313 times their average daily wage in the preceding 3 months. The pension varies with the assessed degree of disability. Regulatory Framework Less seriously disabled persons (assessed according to First law: 1947. grades 8 to 14 of disability) receive a lump-sum benefit of Current law: 1975 (employment insurance), with 2003 between 56 and 503 times their average daily wage in the amendment. preceding 3 months. The pension varies with the assessed degree of disability. Type of program: Social insurance system. Constant-attendance allowance (assessed grades of disability Coverage 1 and 2): 106,100 yen a month if requiring full-time care (57,580 yen if the care is provided by family members); Employees younger than age 65. 53,050 yen a month if requiring part-time care (28,790 yen if the Voluntary coverage for employees in firms in the agricultural, care is provided by family members). forestry, and fisheries industries with less than five regular Benefits are paid every 2 months. employees. Benefit adjustment: Automatic annual adjustment for wage Exclusions: Seasonal workers whose term of employment is changes. 4 months or less. Workers’ Medical Benefits Special schemes for casual workers, seamen, and civil servants. Benefits include medical treatment, surgery, hospitalization, Source of Funds nursing, dental care, medicines, appliances, and transportation. Insured person: 0.7% of earnings; 0.8% for agricultural, There is no limit on the duration of benefits. forestry, fishery, or construction workers. Survivor Benefits Self-employed person: Not applicable. Survivor pension: An annual pension equal to the insured’s Employer: 1.05% of payroll; 1.15% of payroll for agricultural, average daily wage in the preceding 3 months multiplied by forestry and fishery workers; and 1.25% of payroll for between 153 and 245 days, according to number of survivors. construction workers. Eligible survivors include a widow or widower (aged 60 or Government: 25% (33.3% for daily workers) of the cost of older), children and grandchildren (up to the end of the fiscal benefits for unemployment benefit and special monthly year in which the child reaches age 18), parents and allowance and 12.5% of the cost for newborn child and older grandparents (aged 60 or older), and dependent brothers and worker allowances. The government provides subsidies to sisters up to the end of the fiscal year in which the child employers to reduce the need to lay off employees, to reaches age 18; or aged 60 or older. encourage the hiring of hard-to-employ older workers, and to finance other measures to reduce unemployment. Benefits are paid every 2 months. Benefit adjustment: Automatic annual adjustment for wage Qualifying Conditions changes. Unemployment benefit: Six months of insurance during the Death grant (if no eligible survivors): A lump sum equal to last 12 months (or 1 year of insurance during the last 2 years the insured’s average daily wage in the preceding 3 months for part-time workers). Must be registered with the Public multiplied by 1,000 days is payable to a nondependent Employment Security Office and be capable of, and willing to, survivor. work. The unemployed person must report to the Public Funeral grant: 60 days of the insured’s average daily wage in Employment Security Office once every 4 weeks. the 3 months preceding death or 315,000 yen plus 30 days’ Unemployment is not due to voluntary leaving, serious wages, whichever is higher. misconduct, refusal of a suitable job offer, or nonattendance at recommended training (otherwise, the insured is disqualified Administrative Organization from receiving benefit for between 1 and 3 months). Ministry of Health, Labor, and Welfare (http://www.mhlw.go.jp) Special daily or monthly allowances: Includes vocational provides general supervision and administration. training, transportation, moving, and lodging expenses. The allowances are payable while in training and while seeking Worker’s Compensation Division within the Ministry of Health, employment outside of the immediate commuting area as well Labor, and Welfare’s Bureau of Labor Standards administers as to meet other costs. The insured must have at least 3 years of coverage to receive vocational training.
Japan Older worker allowance: Paid to insured persons between Family Allowances ages 60 and 64 whose wage has been reduced by 75% from the wage at age 60. Regulatory Framework Newborn child allowance: Paid to one of two working First and current law: 1971 (children’s allowance), parents who care for a newborn child for up to 1 year. There is implemented in 1972, with 1981, 1985, 1991, 1994, 2000, and 2004 no requirement to seek work while receiving this benefit. amendments. Family care leave benefit: Payable for a maximum of Type of program: Employer-liability and social assistance 3 months if the insured takes leave to look after one of his or system. her family members. Unemployment Benefits Coverage Between 50% and 80% of the insured’s average daily wage Residents with one or more children under age 9. (higher percentages are awarded to lower-wage earners) in the Source of Funds 6 months preceding unemployment; 45% to 80% if between ages 60 and 64. The benefit is payable after a 7-day waiting Insured person: None. period for between 90 and 150 days, according to the length of Self-employed person: None. coverage, age, reasons for unemployment, and employment prospects. Additional days of benefit are payable for between Employer 30 days and 210 days if the insured becomes unemployed from Children’s allowance: 70% of the cost (about 0.09% of wages) an industry in recession, is suffering from physical or mental for children under age 3. illness, or is undergoing training. The minimum daily benefit is 1,696 yen. Special allowance: 100% of the cost for children under age 3. The maximum daily benefit is 7,935 yen. Government Older worker allowance: The amount of benefits is equal to a Children’s allowance: National Treasury, 20% of the cost for maximum of 15% of the wage after age 60, depending on the employees’ children under age 3; prefecture, 5%; and city or percentage of wage reduction. town, 5%. National Treasury, 66.6% of the cost for employees’ Newborn child allowance: The employment fund pays a children between ages 3 and 9; prefecture, 16.6%; and city or monthly benefit equal to 30% of the insured’s average daily town, 16.6%. National Treasury, 66.6% of the cost for self- wage in the 6 months before the leave period times 30. employed and unemployed persons’ children between ages 0 Family care leave benefit: 40% of the insured’s wage before and 9; prefecture, 16.6%; and city or town, 16.6%. the leave period. Special allowance: National Treasury, 66.6% of the cost for Special daily or monthly allowances: Allowances are employees’ children between ages 3 and 9; prefecture, 16.6%; provided for vocational training, transportation, moving and and city or town, 16.6%. lodging expenses while in training, seeking employment Qualifying Conditions outside the immediate commuting area, and other costs. Family allowances Administrative Organization Children’s allowance: For a family of four, the parent’s income Ministry of Health, Labor, and Welfare (http://www.mhlw.go.jp) must be less than 5,963,000 yen in the previous year. Paid for provides general supervision. children under age 9. Employment Security Bureau in the Ministry of Health, Labor, Special allowance: For a family of four, allowances are and Welfare is responsible for the national administration of provided for private and public employees with income of more the program. than 5,963,000 yen but less than 7,800,000 yen in the previous Employment Insurance Sections of prefecture Labor year. Departments and Public Employment Security Offices (part of Family Allowance Benefits the Ministry of Health, Labor, and Welfare) are responsible for the local administration of the program and the collection of Family allowances contributions. Children’s allowance: 5,000 yen a month for each of the first two children and 10,000 yen a month for each subsequent child.
Japan Special allowance: 5,000 yen a month for each of the first two children and 10,000 yen a month for each subsequent child. Allowances are paid every 4 months (in February, June, and October) based on eligibility in January, May, and September, respectively. Benefit adjustment: Benefits are adjusted on an ad hoc basis. Administrative Organization Ministry of Health, Labor, and Welfare (http://www.mhlw.go.jp) supervises the program through its Equal Employment, Children, and Families Bureau. Insurance division of prefecture Welfare Department and Social Insurance Office collects contributions. City or town delivers allowances.
United Kingdom 2020) with 50 weeks of paid contributions before April 1975 or United Kingdom contributions based on earnings of at least 50 times the lower Exchange rate: US$1.00 equals 0.56 pounds (£). earnings level in the tax years April 1975 to April 1978. Since 1978, contributions have been based on earnings of 52 times the lower earnings level. Coverage is required for approxi- mately 90% of the years in the working life (generally 49 years Old Age, Disability, and Survivors for men and 44 years for women). The number of years needed for a full pension is reduced if the Regulatory Framework insured is caring for a child or an elderly or disabled relative. First laws: 1908 (old-age pension), 1911 (disability insurance), No pension is payable if the insured is entitled to less than and 1925 (old-age and survivors’ insurance). 25% of the full pension. Coverage is credited for periods covered by claims for certain benefits (such as incapacity Current laws: 1992 (consolidated legislation), 1995 benefit and jobseeker’s allowance). (pensions), 1999 (welfare reform and pensions), and 2000 Partial pension: The pension is proportionately reduced with a (child support, pensions, and social security). shorter coverage period. Type of program: Social insurance and social assistance Deferred pension: The pension can be deferred until age 70 system. (men) or age 65 (women), subject to a minimum deferral period of 7 weeks. Coverage Age addition: Aged 80 or older. Employed persons aged 16 to 65 (men) or aged 16 to 60 State second pension (S2P): Contributions paid as an (women) with weekly earnings of at least £77. employed person on earnings between the National Insurance Self-employed persons aged 16 to 65 (men) or aged 16 to 60 lower and upper earnings level in any tax year from April 1978. (women) with annual income of at least £4,095 are covered Beginning April 2003, under certain conditions, carers with for all benefits except the state second pension, work injury earnings below set limits (or no earnings) and people who have benefits, and contributory jobseeker’s allowance. a long-term illness or disability will be credited at a specified Voluntary contributors are covered for the basic State threshold for each year they are caring or receiving an eligible Retirement Pension and survivor’s benefits only. benefit. Beginning October 2003, the pension credit (means-tested) is Old-person’s pension (noncontributory retirement available to all residents aged 60 or older. pension): Aged 80 or older and ineligible for the contributory pension or entitled to a pension of less than £46.35 a week. Must have been resident in the UK for Source of Funds 10 years in any 20-year consecutive period after age 60. Insured person: 11% of weekly earnings between £89.01 and Pension credit: Men and women aged 60 or older (rising £595; certain married women and widows contribute 4.85%, gradually to age 65 from 2010 to 2020), resident in the UK, plus an additional 1% on earnings over £595. and whose income is below prescribed levels. Self-employed person: A flat-rate contribution of £2 a week if Long-term incapacity benefit: Contributions are paid on earnings are more than £4,095. In addition, self-employed earnings of at least 25 times the weekly lower earnings level persons with annual profits between £4,615 and £30,940 pay in one of the last 3 tax years before the benefit claim year, plus an earnings-related contribution of 8%, plus 1% of any contributions paid or credited on earnings of at least 50 times profits above £30,490. the weekly lower earnings level in both of the last 2 tax years Voluntary contributor: A flat-rate contribution of £6.95 a before the claim starts. The benefit is payable after 52 weeks of week. disability (as determined by a medical test); after 28 weeks to those who are terminally ill or receiving the highest-rate Employer: 12.8% of employee’s earnings over £89 a week. component of disability living allowance. Government: Total cost of means-tested allowances and Disability living allowance (noncontributory, no means other noncontributory benefits. Also, a treasury grant to test): Disabled before age 65 (can be paid beyond age 65). contributory programs up to a maximum of 17% of benefit The allowance is usually paid after 3 months of disability expenditure per year to cover shortfalls. (except if terminally ill). The amount is determined by care and 15% of all the above contributions is allocated to the National mobility needs. Health Service toward the cost of medical benefits. Attendance allowance (noncontributory, no means test): Disabled at age 65 or older. The allowance is usually paid Qualifying Conditions after 6 months of disability (except if terminally ill). The Basic state retirement pension (flat rate): Age 65 (men) or lower or higher allowance rate is determined by care needs. age 60 (women, rising gradually to age 65 from 2010 to
United Kingdom Carer’s allowance (noncontributory, no means test): Paid Permanent Disability Benefits to a person who forgoes full-time work to care for a severely Long-term incapacity benefit: The benefit is payable starting disabled person (receiving certain qualifying benefits) for from the 53rd week of incapacity (or starting from the 35 hours or more a week. The carer must be over age 16 and 29th week if terminally ill and disabled for at least 28 weeks) under age 65 at the time of claim and not be in full-time following the payment of short-term incapacity benefit (see education or earning over £77 a week. Sickness and Maternity). The benefit is £72.15 a week, plus Survivor benefits: The deceased met the coverage £43.15 a week for a dependent adult caring for the claimant’s requirements for an old-age pension or was a pensioner at the child(ren) subject to certain conditions. A supplement is time of death. payable if the disability began before age 45. Widowed parent’s allowance: A widowed parent with at least Disability living allowance (noncontributory, no means test): one dependent child under age 19 for whom he or she The care component is £57.20, £38.30, or £15.15 a week receives child benefit. according to needs. The mobility component is £39.95 or Bereavement allowance: A weekly benefit is payable to a £15.15 a week according to needs. surviving spouse aged 45 or older without dependent children. Attendance allowance (noncontributory, no means test): The allowance is payable for 52 weeks following the date of £38.30 or £57.20 a week according to needs. widowhood. Carer’s allowance (noncontributory, no means test): £43.15 Bereavement payment: A lump sum is payable immediately a week plus dependent supplements, if appropriate. to help with costs arising on the death of a spouse. Benefit adjustment: Pensions and allowances are increased Guardian’s allowance: For a person raising a full orphan or, annually according to price changes. (The amount of the in certain cases, a child with one surviving parent. increase is calculated according to the retail price index from the previous September.) Old-Age Benefits Basic state retirement pension (flat rate): The maximum Survivor Benefits pension is £77.45 a week. Widowed parent’s allowance: £77.45 a week. Dependent supplement: £46.35 a week for a dependent adult Bereavement allowance: The amount varies with age at the if the dependent’s earnings from work are below a specified date of entitlement or when the widowed parent’s allowance amount. ends. Aged 55 or older, £77.45 a week; aged 45 to 54, a Deferred pension: An increment of 0.1428% of the pension percentage of the full rate is paid. for each week of deferred retirement. Bereavement payment: A lump sum of £2,000 is payable Age addition: £0.25 a week. immediately to the surviving spouse. State second pension (S2P): The accrual rate applies to Guardian’s allowance: £11.55 a week per child; reduced to earnings between the lower and upper earnings levels. For £9.70 if the higher rate of child benefit is payable for the earnings between tax years 1978/1979 and 1987/1988, the child. accrual rate is 25%. The accrual rate on earnings after Benefit adjustment: Pensions and allowances are increased April 1988 will vary depending on the level and year of annually according to price changes. (The amount of the earnings and the date of retirement. The lowest earners will increase is calculated according to the retail price index from have the highest accrual rate. the previous September.) Old-person’s pension (noncontributory retirement pension): £46.35 a week minus any old-age pension. Administrative Organization Benefit adjustment: Pensions and allowances are increased The Pension Service (part of the Department for Work and annually according to price changes. (The amount of the Pensions) administers the state pension scheme and provides increase is calculated according to the retail price index from services and support to pensioners. the previous September.) Jobcentre Plus (part of the Department for Work and Pension credit: A means-tested benefit is payable depending Pensions) administers benefits for people of working age and on personal circumstances and income (from earnings, helps them find work. savings, and other pensions). Those entitled are guaranteed £102.10 a week (single person) or £155.80 a week (couple) Inland Revenue is responsible for the administration of the including their other income. Persons aged 65 or older may National Insurance contribution system and for the payment of receive an additional amount if they have savings or other tax credits. nonstate pensions.
United Kingdom Sickness and Maternity Qualifying Conditions Regulatory Framework Short-term incapacity benefit: At least 4 consecutive days of sickness within a period of incapacity for work. Contribu- First law: 1911. tions must be paid on earnings of at least 25 times the lower Current laws: 1977 (national health service), 1992 earnings level in one of the last 3 tax years before the benefit (consolidated legislation), 1994 (incapacity benefit), and claim year, plus contributions paid or credited on earnings 1999 (welfare reform and pensions). equal to at least 50 times the weekly lower earnings level in Type of program: Social insurance and social assistance both of the last 2 tax years before the claim starts. (cash benefits) system and universal (medical benefits) Young people incapacitated before age 20 (age 25 if they have system. been in education or training) may be able to receive incapacity benefit without satisfying the contribution Coverage conditions. Statutory sick pay: At least 4 consecutive days of sickness Short-term incapacity benefit: All employed and self- within a period of incapacity for work. Paid to employees employed persons who satisfy certain conditions and are not under age 65 with average weekly earnings of at least £77. eligible for statutory sick pay. The benefit is also payable to Maternity allowance: All employed and self-employed unemployed or nonemployed persons if they satisfy the persons must have worked for at least 26 weeks in the 66- necessary contribution conditions. week period before the expected week of childbirth and have Statutory sick pay: Paid by the employer to employees with average weekly earnings of at least £30 in a 13-week period. average weekly earnings of at least £77. The insured must not be receiving statutory maternity pay Maternity allowance: All employed and self-employed from an employer. persons who satisfy certain conditions and are not eligible for Statutory maternity pay: Employed continuously for at least statutory maternity pay. 26 weeks by the same employer up to and including the 15th Statutory maternity pay: Paid by the employer to women week before expected week of childbirth and has average employees with average weekly earnings of at least £77. weekly earnings of at least £77. Statutory paternity pay: Paid by the employer to an Statutory paternity pay: Employed continuously for at least employee whose wife or partner is expecting a baby and 26 weeks by the same employer up to and including the 15th whose average weekly earnings are at least £77. week before the expected week of childbirth. Statutory adoption pay: Paid by the employer to an Statutory adoption pay: Employed continuously for at least employee whose wife or partner is adopting a child and whose 26 weeks by the same employer up to the week of adoption. average weekly earnings are at least £77. Medical benefits: There is no minimum qualifying period. Medical benefits: All residents, irrespective of nationality or the payment of contributions or income tax. Sickness and Maternity Benefits Source of Funds Short-term incapacity benefit: The benefit is paid at a lower and a higher rate. The lower rate is payable for up to Insured person: For incapacity benefit and maternity 28 weeks at £54.40 a week, plus £33.65 a week for a allowance, see source of funds under Old Age, Disability, and dependent adult. The lower-rate benefit is payable after a 3- Survivors, above. day waiting period. The higher rate is payable from week 29 Employer: For incapacity benefit and maternity allowance, to week 52 at £64.35 a week, plus £33.65 a week for a see source of funds under Old Age, Disability, and Survivors, dependent adult. above. The total cost of statutory sick pay (except for certain Statutory sick pay: £64.35 a week is payable for up to small employers) and 8% of statutory maternity and paternity 28 weeks of incapacity after a 3-day waiting period. pay. Maternity allowance: The allowance is paid for up to Government: 92% of statutory maternity and paternity pay 26 weeks. The 26 weeks may start at any time from the (100% in the case of some small employers) and a small 15th week before the expected date of childbirth to the week portion of statutory sick pay; most of the cost of medical following childbirth. The standard rate is £100; 90% of average benefits (National Health Service). The total cost of means- weekly earnings if earnings are less than £100. tested allowances. Statutory maternity pay: The benefit is payable for a total of Medical benefits are funded mainly from general taxation, 26 weeks. The first 6 weeks are paid at 90% of average with a small proportion from National Insurance earnings. The remaining 20 weeks are paid at £100 a week; contributions and patients’ copayments. 90% of average weekly earnings if earnings are less than £100.
United Kingdom Statutory paternity pay: Paid by the employer for 1 or Source of Funds 2 weeks (as chosen by the employee) at £100 a week; 90% of Insured person: See source of funds under Old Age, average weekly earnings if earnings are less than £100. Disability, and Survivors, above. Statutory adoption pay: Paid by the employer for up to Employer: See source of funds under Old Age, Disability, and 26 weeks at £100 a week; 90% of average weekly earnings if Survivors, above. earnings are less than £100. Government: See source of funds under Old Age, Disability, Workers’ Medical Benefits and Survivors, above. Medical services are provided by public hospitals and by Qualifying Conditions doctors and dentists under contract with, and paid directly by, the National Health Service. Benefits include general Industrial injuries disablement benefit: The insured must be practitioner care, specialist services, hospitalization, maternity employed by an employer at the time of an accident that occurs care, dental care, medicines, appliances, home nursing, and in the course of employment. The degree of disability, which family planning. must be over 14%, is assessed by medical examination. In the Cost sharing: Patients pay 80% of the cost of any dental work case of an industrial disease, the insured must have contracted up to £372. Patients pay £6.30 for each prescription. Those a prescribed disease during the course of employment. receiving means-tested benefits and their adult dependents, children under age 16 (under age 19 if a student), pregnant Temporary Disability Benefits women, and nursing mothers are exempt from dental and In the first instance, the benefit is payable for 52 weeks. The prescription charges. People over the state pension age and benefit is first payable after a 3-day waiting period for up to certain other groups are exempt from prescription charges. 28 weeks at £54.40 a week, plus £33.65 a week for a Exemption is also available to others with low income under the dependent adult. From week 29 to week 52, the benefit is National Health Service Low Income Scheme. £64.35 a week, plus £33.65 a week for a dependent adult. There is no limit on duration of benefits. Beginning the 53rd week of incapacity (or starting from the Dependents’ Medical Benefits 29th week if terminally ill and disabled for at least 28 weeks), the benefit is £72.15 a week, plus £43.15 a week for a Same as for the family head. dependent adult caring for the claimant’s child(ren) subject to certain conditions. A supplement is payable if the disability Administrative Organization began before age 45. Benefit adjustment: Pensions and allowances are increased Jobcentre Plus (part of the Department for Work and Pensions) annually according to price changes. (The amount of the administers cash benefits for people of working age and helps increase is calculated according to the retail price index from them find work. the previous September.) Department of Health administers medical benefits and Income support (social assistance): Payable when income is services through the National Health Service. below certain levels. The amount depends on income and circumstances. Income support is not payable if savings Work Injury exceed £8,000 or if the person is working more than 16 hours a week. Regulatory Framework Permanent Disability Benefits First law: 1897. Current law: 1992 (consolidated legislation). Industrial injuries disablement benefit: If assessed as 100% Type of program: Social insurance and social assistance disabled, £116.80 a week is payable from the 15th week after system. the accident or the onset of the disease. Reduced earnings allowance: Only payable for an Coverage occupational accident or disease occurring before October 1990. Up to £46.72 a week is paid if assessed as at Employed persons. least 1% disabled and unable to do the same job, resulting in Exclusion: Self-employed persons. loss of earnings. Constant-attendance allowance: Payable if assessed as 100% disabled; £23.40 or £46.80 a week depending on need; £70.20 or £93.60 a week if needs are greater.
United Kingdom Exceptionally severe disablement allowance: £46.80 a week if Employer: See source of funds under Old Age, Disability, and receiving the top two rates of constant-attendance allowance. Survivors, above. Partial disability: From £23.36 a week for an assessed degree of Government: See source of funds under Old Age, Disability, disability of 20% to £105.12 a week for an assessed degree of and Survivors, above. The total cost of means-tested disability of 90%. allowances after a 3-day waiting period (30 days for the voluntarily insured) for 26 weeks. Workers’ Medical Benefits Provided under the National Health Service. Qualifying Conditions Jobseeker’s allowance (social insurance): Must be aged 18 Survivor Benefits or older and out of work or working less than 16 hours a week (if aged 16 or 17, may qualify only under specified Widowed parent’s allowance: £77.45 a week, paid to a conditions). Contributions must have been paid on earnings widowed parent with at least one dependent child under age 19 of at least 25 times the lower earnings level in one of the last for whom he or she receives child benefit. 2 complete tax years (April to March) before the start of the Bereavement allowance: The amount varies with age at the benefit year (January to December) in which the claim is made, date of entitlement or when the widowed parent’s allowance and contributions must have been paid or credited on earnings ends. Aged 55 or older, £77.45 a week; aged 45 to 54, a of at least 50 times the weekly lower earnings level in both the percentage of the full rate is paid. appropriate tax years. Earnings must not be higher than the Bereavement payment: A lump-sum payment of £2,000 is prescribed amount. payable immediately to help with costs arising on the death of Must be registered at a job center and be capable of, available a spouse. for, and actively seeking employment and must also have a Guardian’s allowance: £11.55 a week per child; reduced to current jobseeker’s agreement. £9.70 if the higher rate of child benefit is payable for the Jobseeker’s allowance (social assistance): Paid if the child. person has no income or an income that does not exceed the Benefit adjustment: Pensions and allowances are increased applicable amount. The person has no entitlement to the annually according to price changes. (The amount of the jobseeker’s allowance (social insurance); the contributory increase is calculated according to the retail price index from benefit is insufficient or has expired. The allowance is not the previous September.) payable if savings exceed £8,000. Administrative Organization Unemployment Benefits Jobcentre Plus (part of the Department for Work and Jobseeker’s allowance (social insurance): A flat-rate Pensions) administers cash benefits for people of working allowance is paid for up to 6 months at £54.65 a week if age and helps them find work. aged 25 or older, £43.25 if aged 18 to 24, or £32.90 if under age 18. The allowance is payable after a 3-day waiting period. Unemployment Jobseeker’s allowance (social assistance): The amount of the allowance depends on age and on household income and Regulatory Framework composition. A single person receives between £32.90 and £54.65 a week depending on age. First law: 1911. Current law: 1995 (jobseekers). Administrative Organization Type of program: Social insurance and social assistance Jobcentre Plus (part of the Department for Work and system. Pensions) administers cash benefits for people of working age and helps them find work. Coverage Family Allowances All unemployed jobseekers meeting the entitlement conditions. Regulatory Framework Source of Funds First law: 1945 (child benefit). Insured person: See source of funds under Old Age, Current laws: 1992 (consolidated legislation) and 2002 (tax Disability, and Survivors, above. credits). Type of program: Universal (child benefit) and tax credits system.
United Kingdom Coverage Child benefit and child tax credit: Residents with one or more children. Working tax credit: Low-income workers with or without children. Source of Funds Insured person: None. Employer: None. Government: Total cost. Qualifying Conditions Child benefit and child tax credit: Child must be under age 16 (under age 19 if a student). Eligibility is also dependent on residence and presence in the UK. Working tax credit: Working for at least 16 hours a week. Family Allowance Benefits Child benefit: £16.05 a week for the eldest qualifying child and £10.75 for each additional child. Child tax credit: The credit depends on parents’ income. The minimum credit of £10.40 a week is paid if gross income is below £50,000. Higher amounts are payable for lower levels of income and if there is more than one qualifying child. The credit is paid in addition to child benefit and working tax credit. Working tax credit: The credit depends on income and family status and can include approved childcare costs. Administrative Organization Inland Revenue administers the child benefit and tax credits.